Ranting on Stock Market Day Trading (March/2009)

With the month of March largely over, I want to describe my trading progression for the month. Near the beginning of the month, I read professional analysts saying it was time to sell as the market bottom has not been reached, with plenty of signs for continued stock market downturn. From an economic standpoint, some of that analysis had substance. From the candlestick technical analysis standpoint, I saw signs of a trend reversal. After all, the trend line is the life-line of my trading foundation.

Not to be deterred, I proceeded with caution, as always, especially with professionals saying “sell”. And I suppose they get hefty bonuses for what has turned out to be a wrong call. Oh, but the financial industry needs to reward risk taking – no risk, no gain; no pain, no gain. I need to find myself a job where I get bonuses for making the highest risk calls, no matter the outcome. To be fair, perhaps they meant in the longer term, the stock markets are heading lower and that March was just incidental. Or as some have said, a bear market rally.

I don’t directly pay for professional analysts recommendations although I do get reports from my brokerage company. And I can’t help but find the various freely available news and articles on the topic. And as time goes on, I continue to heed their recommendations less and less. They are wrong so many times, I am not sure if it is worth my trouble to even read their advice.

Well, I made a net positive gain on day-trading in March. I need rises and drops in the stock market to gain trading profits. I need price movement where I trade on the trends to make trading profits. I was long and short in three stocks to garner a 15% overall gain in my margin account. I tried to adhere to the day trading paradigm but at times I was left holding my positions on an inter-day basis. I should never have put myself in the situation of holding past closing but my reluctance to take the initial loss led to a bigger loss which finally led to holding past closing. Fortunately, because of the volatility (there were plenty of gap-up and gap-down scenarios), I was able to recover at or shortly after the open on the next trading day; from there, I continued my day-trading routine. I had losing trades which is how it should be if I am wrong on the direction of the stock price. The most important matter is to emerge with a net gain after all trades are tallied. My brokerage company appreciates the trading commissions.

Main lessons to be remembered:

  1. Watch the short-term trend lines for price direction and movement.
  2. Use the short-term trend lines as a basis for day-trading. If the short-term trend line shows upward movement, it makes day-trading a long position a risk-reward justified trade.
  3. If you are wrong on the stock price direction, close the position and wait for another opportunity. Accept the loss. In day trading, there are plenty of opportunities to profit on the rise and drop of the stock price.

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